2-Steamship Mutual Underwriting Association20230926-11-1yjc3ny

THIRD DIVISION
[G.R. No. 196072. September 20, 2017.]
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION

(BERMUDA) LIMITED, petitioner, vs. SULPICIO LINES, INC.,
respondent.
[G.R. No. 208603. September 20, 2017.]
SULPICIO LINES, INC., petitioner, vs. STEAMSHIP MUTUAL

UNDERWRITING ASSOCIATION (BERMUDA) LIMITED ,
respondent.
DECISION
LEONEN, J : p
An insured member may be compelled to arbitration pursuant to the

Rules of the Protection and Indemnity Club, which were incorporated in the
insurance policy by reference. Where there are multiple parties, the court
must refer to arbitration the parties covered by the agreement while
proceeding with the civil action against those who were not bound by the
arbitration agreement.
G.R. No. 196072 is a Petition for Review 1 seeking to set aside the
November 26, 2010 Decision 2 and March 10, 2011 Resolution 3 of the Court
of Appeals in CA-G.R. SP No. 106103.
G.R. No. 208603 is a Petition for Indirect Contempt 4 filed by Sulpicio
Lines, Inc. (Sulpicio) against Steamship Mutual Underwriting Association
(Bermuda) Limited (Steamship). It prays, among others, that Steamship be
(a) declared guilty of indirect contempt; (b) imposed a fine of P30,000.00;
and (c) ordered to restitute to Sulpicio the amount of US$69,570.99 or its
equivalent in Philippine currency plus interest, computed from December 3,
2012 until fully restituted. 5
Steamship was a Bermuda-based Protection and Indemnity Club,
managed outside London, England. 6 It insures its members-shipowners
against "third party risks and liabilities" for claims arising from (a) death or
injury to passengers; (b) loss or damage to cargoes; and (c) loss or damage
from collisions. 7
Sulpicio insured its fleet of inter-island vessels with Steamship for
Protection & Indemnity risks through local insurance agents, Pioneer
Insurance and Surety Corporation (Pioneer Insurance) or Seaboard-Eastern
Insurance Co., Inc. (Seaboard-Eastern). 8 One (1) of these vessels was the
M/V Princess of the World, evidenced by a Certificate of Entry and
CD Technologies Asia, Inc. © 2023 cdasiaonline.com
Acceptance issued by Steamship, which provided:
CERTIFICATE OF ENTRY AND ACCEPTANCE
by the Club of your proposal for entering the ship(s) specified below,
and of
the tonnage set out against each, in:
Class 1 PROTECTION AND INDEMNITY
of the Club from
Noon 20th February 2005 to Noon 20th February 2006
or until sold, lost, withdrawn or the entry is terminated in accordance
with the rules, to the extent specified and in accordance with the Act,
By(e)-Laws and the Rules from time to time in force and the special
terms specified overleaf.
Your name has been entered in the Register of Members of the Club
as a Member.
FOR ACCOUNT OF CERTIFICATE
Sulpicio Lines, Inc., NUMBER
1st Floor, Reclamation Area, 155,534
P.O. Box No. 137
Cebu City, Philippines.
NAME OF SHIP BUILT ENTERED CLASS PORT OF
GROSS REGISTRY
TONNAGE
"PRINCESS OF 1975 Cebu City B.V. 6,150
THE OCEAN"
THE UNIVERSE"
THE CARIBBEAN"
THE WORLD"
"PRINCESS OF 1984 Cebu City X.X. 19,329
THE STARS" (Rebuilt
1990)
xxx xxx xxx
NOTES
1. REFERENCE IS 2. THE RULES ARE
REQUESTED TO THE PRINTED ANNUALLY IN
RULES AS TO THE BOOK FORM,
CIRCUMSTANCES OF INCORPORATING ALL
ENTRY BEING PREVIOUS ALTERATIONS
CANCELLED AND AS TO AND A COPY IS SENT TO
THE CIRCUMSTANCES OF EACH MEMBER.
AN ALTERATION IN THE ALTERATIONS CAN BE MADE
RULES OR BY(E)-LAWS. BY ORDINARY RESOLUTION
FOLLOWING A GENERAL
MEETING NOTIFIED TO ALL
MEMBERS. 9
On July 7, 2005, M/V Princess of the World was gutted by fire while on
voyage from Iloilo to Zamboanga City, resulting in total loss of its cargoes.
The fire incident was found by the Department of the Interior and Local
Government to be "accidental" in nature. 10
Sulpicio claimed indemnity from Steamship under the Protection &
Indemnity insurance policy, Steamship denied the claim and subsequently
rescinded the insurance coverage of Sulpicio's other vessels on the ground
that "Sulpicio was grossly negligent in conducting its business regarding
safety, maintaining the seaworthiness of its vessels as well as proper
training of its crew." 11
On June 28, 2007, Sulpicio filed a Complaint 12 with the Regional Trial
Court of Makati City against Steamship; one (1) of its directors, Gary
Rynsard; and its local insurance agents Pioneer Insurance and Seaboard-
Eastern for specific performance and damages. This Complaint was docketed
as Civil Case No. 07-577, was amended on August 10, 2007, 13 and further
amended on September 11, 2007. 14
Steamship filed its Motion to Dismiss and/or to Refer Case to Arbitration
15 pursuant to Republic Act No. 9285, or the Alternative Dispute Resolution
Act of 2004 (ADR Law), and to Rule 47 16 of the 2005/2006 Club Rules, which
supposedly provided for arbitration in London of disputes between
Steamship and its members. 17 The other defendants filed separate motions
to dismiss. 18
Branch 149, Regional Trial Court, Makati City denied the motions to
dismiss. In its July 11, 2008 Order, 19 denying Steamship's motion and
supplemental motion to dismiss and citing 20 European Resources and
Technologies, Inc. v. Ingenieuburo Birkhahn + Nolte, Ingeniurgesellschaft
Gmbh, 21 the Regional Trial Court held that "arbitration [did] not appear to
be the most prudent action, . . . considering that the other defendants . . .
ha[d] already filed their [respective] [a]nswers." 22 Steamship filed its Motion
for Reconsideration, 23 but it was likewise denied in the Order 24 dated
September 24, 2008.
Steamship assailed the trial court orders before the Court of Appeals
through a Rule 65 Petition, docketed as CA-G.R. SP No. 106103. 25 The Court
of Appeals dismissed the petition in its November 26, 2010 Decision. 26 It
found no grave abuse of discretion on the part of the trial court in denying
Steamship's Motion to Dismiss and/or to Refer Case to Arbitration 27 or any
convincing evidence to show that a valid arbitration agreement existed
between the parties. 28 Steamship's Motion for Reconsideration of this
Decision was likewise denied in the Resolution 29 dated March 10, 2011.
On April 29, 2011, Steamship filed before this Court this Petition for
Review, docketed as G.R. No. 196072. In compliance with this Court's June
13, 2011 Resolution, 30 Sulpicio filed its Comment 31 on August 31, 2011 and
Steamship filed its Reply 32 on October 20, 2011.
On September 6, 2013, Sulpicio filed with this Court a Petition for
Indirect Contempt 33 under Rule 71 of the Rules of Court against Steamship.
This Petition was docketed as G.R. No. 208603.
Sulpicio alleges that sometime in September 2012, it settled its
judgment liability of P4,121,600.00 in Civil Case No. CEB-24783, entitled
Verna Unabia v. Sulpicio Lines, Inc. 34 However, the actual amount
reimbursed by Steamship was not P4,121,600.00, equivalent to
US$96,958.47, but only US$27,387.48. 35 Steamship deducted
US$69,570.99, which allegedly represented Sulpicio's share in the arbitration
costs for the arbitration in London of the dispute in Civil Case No. 07-577. 36
Sulpicio accuses Steamship of indirect contempt for its "improper
conduct tending directly, or indirectly, to impede, obstruct, or degrade the
administration of justice" 37 consisting of the following acts:
(a) Without Sulpicio's knowledge or consent, Steamship
initiated and "concluded" during the pendency of this case an alleged
"arbitration proceeding" in London for the "Arbitrator" there to
"resolve" the very dispute involved in this case;
(b) Without Sulpicio's knowledge or consent, Steamship
proclaimed itself the "victor" entitled to arbitration costs from
Sulpicio;
(c) Without Sulpicio's knowledge or consent, Steamship
unceremoniously deducted from the refund due to Sulpicio in the
separate "Unabia Case" the huge amount of U.S.$69,570.99 despite
the fact that: (a) Said "Unabia Case" is unrelated to the instant case;
(b) The propriety of a London arbitration is still to be resolved in this
case by this Honorable Court; (c) Steamship "enforced" by itself said
"arbitration costs" against Sulpicio without the courtesy of even
informing this Honorable Court about it[; and]
(d) Without Sulpicio's knowledge or consent, and more
importantly, without the prior approval of this Honorable Court,
Steamship initiated and "concluded" said London "arbitration" during
the pendency of this G.R. No. 196072 and before this Honorable
Court could render its ruling or decision. 38 (Emphasis in the original)
Steamship filed its Comment/Opposition 39 on January 30, 2014, to
which Sulpicio filed its Reply 40 on July 2, 2014.
In its Resolution 41 dated January 15, 2014, this Court resolved to
consolidate G.R. Nos. 208603 and 196072.
The issues for this Court's resolution are:
First, whether or not the petition in G.R. No. 196072 is proper under the
Rules of Court;
Second, whether or not there is a valid and binding arbitration
agreement between Steamship Mutual Underwriting (Bermuda) Limited and
Sulpicio Lines, Inc.;
Third, whether or not the Court of Appeals gravely erred in affirming
the Regional Trial Court Order denying referral of Sulpicio Lines, Inc.'s
complaint to arbitration in London in accordance with the 2005/2006 Club
Rules; and
Finally, whether or not Steamship Mutual Underwriting (Bermuda)
Limited is guilty of indirect contempt.
This Court addresses first the procedural issue raised by Sulpicio.
I.A
Sulpicio contends that Steamship's Petition for Review should be

dismissed outright on procedural grounds. 42
First, this Petition, couched as a Rule 45 Petition, is actually a Rule 65
Petition because it contained arguments dealing with "grave abuse of
discretion" allegedly committed by the Court of Appeals. 43
Second, the Petition's Verification and Certification against Forum
Shopping is defective because it was signed and executed by Steamship's
lawyer. Additionally, the Power of Attorney appended to the Petition did not
indicate its signatory's name and authority. 44
Third, the issue of whether or not Sulpicio has been furnished with the
Club's Rulebook, which contained the arbitration clause, is factual and
beyond the realm of a Rule 45 petition. 45
In its Reply, Steamship avers that its counsel's law firm was duly
authorized to sign its Verification and Certification against Forum Shopping.
Moreover, Sulpicio never assailed this law firm's authority to represent
Steamship before the Regional Trial Court, and therefore, is estopped to
deny its authority before his Court. 46 Together with its Reply, Steamship
submitted a copy of the Secretary's Certificate 47 to the July 24, 2007 Board
of Directors' resolution authorizing Scott Davis (Davis) or his Assistant
Secretaries to sign a Power of Attorney on behalf of Steamship. It also
appended a Secretary's Certificate 48 to the July 26, 2011 Board of Directors'
resolution re-appointing Davis and John Charles Ross Collis 49 to their current
positions as Secretary and Assistant Secretary, respectively.
Steamship further contends that the basic issues raised in the petition
are questions of law that are cognizable by this Court. 50 It adds that a
reversal of some factual findings is warranted because the Court of Appeals
committed a grave abuse of discretion in concluding that Sulpicio was
ignorant of the 2005/2006 Club Rules and its arbitration clause, when
Steamship had presented ample evidence to establish otherwise. 51
Steamship submits that this Court may exercise its power of review to
reverse errors committed by the lower courts including grave abuse of
discretion of the Court of Appeals. 52
This Court finds for Steamship.
The appeal from a final disposition of the Court of Appeals is a petition
for review under Rule 45 and not a special civil action under Rule 65. 53 Rule
45, Section 1 is clear that:
Section 1. Filing of petition with Supreme Court. — A party
desiring to appeal by certiorari from a judgment or final order or
resolution of the Court of Appeals, the Sandiganbayan, the Regional
Trial Court or other courts whenever authorized by law, may file with
the Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly set
forth.
A Rule 45 petition is the proper remedy to reverse a decision or
resolution of the Court of Appeals even if the error assigned is grave abuse
of discretion in the findings of fact or of law. "The existence and availability
of the right of appeal prohibits the resort to certiorari because one of the
requirements for the latter remedy is that there should be no appeal." 54
Allegations in the petition of grave abuse of discretion on the part of
the Court of Appeals do not ipso facto render the intended remedy that of
certiorari under Rule 65 of the Rules of Court. In Microsoft Corporation v.
Best Deal Computer Center Corporation, 55 this Court discussed the
distinction between a Petition for Certiorari under Rule 65 and a Petition for
Review on Certiorari under Rule 45:
Significantly, even assuming that the orders were erroneous,
such error would merely be deemed as an error of judgment that
cannot be remedied by certiorari. As long as the respondent acted
with jurisdiction, any error committed by him or it in the exercise
thereof will amount to nothing more than an error of judgment which
may be reviewed or corrected only by appeal. The distinction is clear:
A petition for certiorari seeks to correct errors of jurisdiction while a
petition for review seeks to correct errors of judgment committed by
the court. Errors of judgment include errors of procedure or mistakes
in the court's findings. Where a court has jurisdiction over the person
and subject matter, the decision on all other questions arising in the
case is an exercise of that jurisdiction. Consequently, all errors
committed in the exercise of such jurisdiction are merely errors of
judgment. Certiorari under Rule 65 is a remedy designed for the
correction of errors of jurisdiction and not errors of judgment. 56
(Citations omitted)
In this case, what Steamship seeks to rectify may be construed as
errors of judgment of the Court of Appeals. These errors pertain to
Steamship's allegations of the Court of Appeals' failure to rule that a valid
arbitration agreement existed between the parties and to refer the case to
arbitration. It does not impute any error with respect to the Court of Appeals'
exercise of jurisdiction. As such, the Petition is simply a continuation of the
appellate process where a case is elevated from the trial court of origin, to
the Court of Appeals, and to this Court via Rule 45.
The basic issues raised in the Petition for Review are: (1) whether or
not an arbitration agreement may be validly incorporated by reference to a
contract; and (2) how the trial court should proceed to trial upon its finding
"that only some and not all of the defendants are bound by an arbitration
agreement[.]" 57 These are questions of law properly cognizable in a Rule 45
petition.
I n BCDA v. DMCI Project Developers, Inc., 58 citing Villamor v.
Balmores: 59
[T]here is a question of law "when there is doubt or controversy as to
what the law is on a certain [set] of facts." The test is "whether the
appellate court can determine the issue raised without reviewing or
evaluating the evidence." Meanwhile, there is a question of fact when
there is "doubt . . . as to the truth or falsehood of facts." The question
must involve the examination of probative value of the evidence
presented. 60
Sulpicio denies being bound by the arbitration clause in the Club Rules
since neither the Certificate of Entry and Acceptance, which covers M/V
Princess of the World, mentioned this arbitration agreement, nor was it given
a copy of the Club Rulebook.
In sustaining the denial of Steamship's Motion to Dismiss and/or to
Refer Case to Arbitration, the Court of Appeals ruled:
Unfortunately, the Court is not convinced that a valid and
binding arbitration agreement exists between the Steamship and
Sulpicio. And even assuming that there is such an agreement, it does
not comply with Section 4 of the Arbitration Law which provides that
"a contract to arbitrate a controversy thereafter arising between the
parties, as well as a submission to arbitrate an existing controversy
shall be in writing and subscribed by the party sought to be charged,
or by his lawful agent."
As correctly pointed out by Sulpicio, there is no proof that it
was served a copy of the Club Rules in question and that it signed
therein. 61 (Emphasis supplied)
A factual question on whether or not Sulpicio was given a copy of the
Club Rulebook must be resolved because it has a bearing on the legal issue
of whether or not a binding arbitration agreement existed between the
parties. Factual review, nonetheless, may be justified: (1) when there is a
grave abuse of discretion in the appreciation of facts; 62 (2) when the
judgment of the Court of Appeals is premised on a misapprehension of facts;
63 and (3) when the Court of Appeals' findings of fact are premised on the
absence of evidence but such findings are contradicted by the evidence on

record. 64
Here, this Court finds grave abuse of discretion by the Court of Appeals
in its appreciation of facts. As will be discussed later, the evidence on record
shows that Sulpicio was furnished a copy of the Club Rulebook and was
aware of its provisions. Other pieces of evidence were Sulpicio's letters 65 to
Steamship and the affidavits of Director and Head of Underwriting of the
Club and In-Charge of Far East membership including the Philippines,
Jonathan Andrews; 66 Vice-President of Pioneer Insurance who was in charge
of Sulpicio's account, Roderick Gil Narvacan; 67 and Manager of Seaboard-
Eastern's Marine Department who was in charge of Sulpicio's account, Elmer
Felipe. 68
I.B
The Verification and Certification against Forum Shopping signed by

Steamship's counsel substantially complied with the requirements of the
Rules of Court.

Under Rule 45 of the Rules of Court, a petition for review must be
verified 69 and must contain a sworn certification against forum shopping. 70
"A pleading is verified by an affidavit that the affiant has read the
pleading and that the allegations therein are true and correct of his [or her]
personal knowledge or based on authentic records." 71
On the other hand, a certification against forum shopping is a
petitioner's statement "under oath that he [or she] has not . . . commenced
any other action involving the same issues in the Supreme Court, the Court
of Appeals or different divisions, or any other tribunal or agency[.]" 72 In this
certification, the petitioner must state the status of any other action or
proceeding, if there is any, and undertakes to report to the courts and other
tribunal within five (5) days from learning of any similar action or
proceeding. 73
Failure to comply with the foregoing mandates constitutes a sufficient
ground for the denial of the petition. 74
In case the petitioner is a private corporation, the verification and
certification may be signed, for and on behalf of this corporation, by a
specifically authorized person, including its retained counsel, who has
personal knowledge of the facts required to be established by the
documents. 75 The reason is that:
A corporation, such as the petitioner, has no powers except
those expressly conferred on it by the Corporation Code and those
that are implied by or are incidental to its existence. In turn, a
corporation exercises said powers through its board of directors
and/or its duly authorized officers and agents. Physical acts, like the
signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate bylaws or by a specific act of
the board of directors. "All acts within the powers of a corporation
may be performed by agents of its selection; and, except so far as
limitations or restrictions which may be imposed by special charter,
by-law, or statutory provisions, the same general principles of law
which govern the relation of agency for a natural person govern the
officer or agent of a corporation, of whatever status or rank, in
respect to his power to act for the corporation; and agents once
appointed, or members acting in their stead, are subject to the same
rules, liabilities and incapacities as are agents of individuals and
private persons."
xxx xxx xxx
For who else knows of the circumstances required in the Certificate
but its own retained counsel. Its regular officers, like its board
chairman and president, may not even know the details required
therein. 76
In this case, Steamship's Petition's Verification and Certification against
forum shopping was signed by its counsel. A Power of Attorney 77 dated
August 1, 2007 was appended to the Petition, which purportedly authorized
"Atty. Charles Jay D. Dela Cruz or any of the partners of Del Rosario & Del
Rosario . . . to sign the verification or certification" 78 against forum shopping
of petitions and appeals in appellate courts necessary in representing and
defending Steamship. It was notarized, apostilled in accordance with the law
of Bermuda and authenticated by the Philippine consulate in London, United
Kingdom. However, a closer look into the Power of Attorney reveals that the
signatory of the document was not identified. This was pointed out by
Sulpicio in its Comment. 79
Nonetheless, Steamship subsequently filed its Reply, 80 to which it
attached two (2) Secretary's Certificates 81 signed by Davis containing
excerpts of the July 24, 2007 and July 26, 2011 board resolutions showing
Davis' authority to execute the Power of Attorney on its behalf, and Davis'
reappointment as Corporate Secretary, respectively. The signature in the
Power of Attorney was similar in form and appearance to Davis' signature in
the Secretary's Certificates, which lends credence to Steamship's submission
that the Power of Attorney was executed and signed by Davis. 82
The rule on verification of a pleading is a formal, not jurisdictional,
requirement. 83 This Court has held that:
Non-compliance with the verification requirement does not
necessarily render the pleading fatally defective, and is substantially
complied with when signed by one who has ample knowledge of the
truth of the allegations in the complaint or petition, and when matters
alleged in the petition have been made in good faith or are true and
correct. 84 (Citation omitted)
On the other hand, a certification not signed by a duly authorized
person renders the petition subject to dismissal. 85 Moreover, the lack of or
defect in the certification is not generally curable by its subsequent
submission or correction. 86 However, there are cases where this Court
exercised leniency due to the presence of special circumstances or
compelling reasons, such as the prima facie merits of the petition. 87 In some
cases, the subsequent submission of proof of authority of the party signing
the certification on behalf of the corporation was considered as substantial
compliance with the rules and the petition was given due course. 88
In Shipside Incorporated v. Court of Appeals, 89 this Court held:
Moreover, in Loyola, Roadway , and Uy, the Court excused non-
compliance with the requirement as to the certificate of non-forum
shopping. With more reason should we allow the instant petition since
petitioner herein did submit a certification on non-forum shopping,
failing only to show proof that the signatory was authorized to do so.
That petitioner subsequently submitted a secretary's certificate
attesting that Balbin was authorized to file an action on behalf of
petitioner likewise mitigates this oversight. 90
Likewise, this Court holds that there is substantial compliance with the
rules on verification and certification against forum shopping. Steamship's
subsequent submission of the Secretary's Certificates showing Davis'
authority to execute the Power of Attorney in favor of Del Rosario & Del
Rosario cured the defect in the verification and certification appended to the
petition. Under the circumstances of this case, Steamship's counsel would be
in the best position to determine the truthfulness of the allegations in the
petition and certify on non-forum shopping considering that "it has handled
the case for . . . Steamship since its inception." 91 This Court also considers
Steamship's allegations that the same Power of Attorney was used in its
Answer Ad Cautelam filed on August 12, 2008 before the Regional Trial Court
and in its Petition for Certiorari before the Court of Appeals on November 12,
2008. Significantly, Sulpicio never questioned the authority of Del Rosario &
Del Rosario to represent Steamship in the proceedings before the lower
courts. 92
The rules on forum-shopping are "designed . . . to promote and
facilitate the orderly administration of justice." They are not to be
interpreted with "absolute literalness" as to subvert the procedural rules'
ultimate objective of achieving substantial justice as expeditiously as
possible. 93 These goals would not be circumvented by this Court's
recognition of the authorized counsel's signature in the verification and
certification of non-forum shopping.
This Court now proceeds to the substantive issues of whether or not
there was a valid arbitration agreement between the parties and whether or
not referral to arbitration was imperative.
II
Steamship contends that the arbitration agreement set forth in its Club
Rules, which in turn is incorporated by reference in the Certificate of Entry
and Acceptance of M/V Princess of the World, 94 is valid and binding upon
Sulpicio, 95 pursuant to this Court's ruling in BF Corporation v. Court of
Appeals. 96
Steamship further avers that the Court of Appeals' finding that there
was no proof that Sulpicio was given a copy of the Club Rules was incorrect
and contradicted by the evidence on record. 97 Steamship adds that by
Sulpicio's own declarations in its letter-application 98 for membership of its
vessels, Sulpicio acknowledged that it had received a copy of the Club Rules
and that its membership in Steamship is subject to them. 99 It contends that
Sulpicio was "provided with copies of the Club's Rule books on an annual
basis by Pioneer Insurance and Seaboard-Eastern who acted as brokers [for
Sulpicio's] entry." 100 Moreover, throughout Sulpicio's almost 20 years of
membership, 101 it has been aware of, and relied upon, the terms of the Club
Rules, as revealed in its various correspondences through its brokers with
Steamship. 102 Thus, Sulpicio is estopped to deny that it was aware of, and
agreed to be bound by, the Club Rules and their provisions. 103
Steamship argues that a referral of the case to arbitration is imperative
pursuant to the mandates of Republic Act No. 9285 or the ADR Law. 104 It
adds that the trial court's reliance on the ruling in European Resources and
Technologies, Inc. v. Ingenieuburo Birkhahn + Nolte, Ingeniurgesellschaft
Gmbh 105 was misplaced. That case was decided on the basis of Republic Act
876 or the Old Arbitration Law, which did not provide for instances where
some of the multiple impleaded parties were not covered by an arbitration
agreement. 106 It adds that now, Section 25 of the ADR Law specifically
provides that "the court shall refer to arbitration those parties who are
bound by the arbitration agreement although the civil action may continue
as to those who are not bound by such arbitration agreement." 107 Even from
a procedural standpoint, Steamship contends that the claim against it may
be separated from Pioneer Insurance and Seaboard-Eastern as these local
insurance companies were impleaded as solidary obligors/debtors. 108
Steamship further submits that "a Philippine court is an inconvenient
forum to thresh out the issues involved in Sulpicio's claim." 109 First,
Sulpicio's claim is governed by the English Law, as expressly stated in the
2005/2006 Club Rules. 110 Second, a Philippine court would be "an
ineffective venue" to enforce any judgment that may be obtained against
Steamship, a foreign corporation. 111 Thus, on the basis of the doctrine of
forum non conveniens alone, Steamship contends that the claim against it
should be referred to arbitration in London. 112
Finally, Steamship holds that "Sulpicio should participate in the London
Arbitration as [it] is already progressing . . . [i]nstead of wasting its time on
prosecuting its claim before a Philippine court that is devoid of jurisdiction[.]"
113
Sulpicio counters that the Court of Appeals was correct in ruling that
there was no arbitration agreement between the parties. 114 The arbitration
clause in the 2005/2006 Club Rules is not valid and binding for failure to
comply with Section 4 of the ADR Law, which requires that an arbitration
agreement be in writing and subscribed by the parties or their lawful agent.
115 Sulpicio adds that "[i]n White Gold Marine Services, Inc. vs. Pioneer
Insurance and Surety Corporation, . . . Steamship did not invoke arbitration
but filed suit before a Philippine court, which . . . proves that [the 2005/2006
Club Rules' arbitration clause] is neither mandatory nor binding" upon the
parties. 116
Sulpicio further contends that the Certificate of Entry and Acceptance
did not provide for arbitration as a mode of dispute resolution, that the rules
referred to was not particularly identified or described, and that it never
received a copy of the Club Rules. 117
Assuming there was a valid arbitration agreement between them,
Sulpicio submits that the trial court correctly relied on the ruling in European
Resources in denying the referral of the case to arbitration. 118 Arbitration in
London would not be the "most prudent action" because the arbitral decision
will not be binding on Pioneer Insurance and Seaboard-Eastern and it would
result in a "split jurisdiction." 119 Sulpicio further contends that the exception
laid down in European Resources still applies because the ADR Law was
already in effect when the case was decided by this Court. 120
In its Reply, Steamship maintains that there is a valid arbitration clause
between them and that Sulpicio was well aware of its Club Rules. It adds that
Sulpicio is merely feigning ignorance of the Club Rules to escape the
obligatory nature of the arbitration agreement. Steamship further reiterates
that Section 25 of the ADR Law is plain and clear that when there are
multiple parties in an action, the court must "refer to arbitration those
parties bound by the arbitration agreement and let the action remain as to
those who are not bound." 121 "Moreover, as the relationship between . . .
Steamship and . . . Sulpicio are governed by English Law[,] it may be more
prudent to refer the dispute to arbitration in London under the doctrine of
forum non conveniens." 122
Finally, Steamship avers that under Rule 47 of the 2005/2006 Club
Rules, it has "the right to pursue legal action against a [m]ember before any
jurisdiction at its sole discretion." 123 Even if there is no such provision,
Steamship contends that it may waive its rights to compel arbitration in
individual cases. 124 It adds that the waiver of such right in White Gold has
no effect to this case because Sulpicio is not a party in that case. 125
II.A
It is the State's policy to promote party autonomy in the mode of

resolving disputes. 126 Under the freedom of contract principle, parties to a
contract may stipulate on a particular method of settling any conflict
between them. 127 Arbitration and other alternative dispute resolution
methods like mediation, negotiation, and conciliation are favored over court
action. Republic Act No. 9285 128 expresses this policy:
Section 2. Declaration of Policy. — It is hereby declared the policy
of the State to actively promote party autonomy in the resolution of
disputes or the freedom of the parties to make their own
arrangements to resolve their disputes. Towards this end, the State
shall encourage and actively promote the use of Alternative Dispute
Resolution (ADR) as an important means to achieve speedy and
impartial justice and declog court dockets . As such, the State shall
provide means for the use of ADR as an efficient tool and an
alternative procedure for the resolution of appropriate cases.
Likewise, the State shall enlist active private sector participation in
the settlement of disputes through ADR. This Act shall be without
prejudice to the adoption by the Supreme Court of any ADR system,
such as mediation, conciliation, arbitration, or any combination
thereof as a means of achieving speedy and efficient means of
resolving cases pending before all courts in the Philippines which
shall be governed by such rules as the Supreme Court may approve
from time to time. (Emphasis supplied)
Arbitration, as a mode of settling disputes, was already recognized in
the Civil Code. 129 In 1953, Republic Act No. 876 was passed, which
reinforced domestic arbitration as a process of dispute resolution. Foreign
arbitration was likewise recognized through the Philippines' adherence to the
United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of 1958, otherwise known as the New York Convention. 130
Republic Act No. 9285 sets the basic principles in the enforcement of foreign
arbitral awards in the Philippines. 131
Consistent with State policy, "arbitration agreements are liberally
construed in favor of proceeding to arbitration." 132 Every reasonable
interpretation is indulged to give effect to arbitration agreements. Thus,
courts must give effect to the arbitration clause as much as the terms of the
agreement would allow. 133 "Any doubt should be resolved in favor of
arbitration." 134
II.B
Sulpicio contends that there was no valid arbitration agreement

between them, and if there were, it was not aware of it.
This Court rules against Sulpicio's submission.
The contract between Sulpicio and Steamship is more than a contract
of insurance between a marine insurer and a shipowner. By entering its
vessels in Steamship, Sulpicio not only obtains insurance coverage for its
vessels but also becomes a member of Steamship.
A protection and indemnity club, like Steamship, is an association
composed of shipowners generally formed for the specific purpose of
providing insurance cover against third-party liabilities of its members. 135 A
protection and indemnity club is a mutual insurance association, described in
White Gold Marine Services, Inc. v. Pioneer Insurance and Surety Corp. 136 as
follows:
[A] mutual insurance company is a cooperative enterprise where the
members are both the insurer and insured. In it, the members all
contribute, by a system of premiums or assessments, to the creation
of a fund from which all losses and liabilities are paid, and where the
profits are divided among themselves, in proportion to their interest.
Additionally, mutual insurance associations, or clubs, provide three
types of coverage, namely, protection and indemnity, war risks, and
defense costs. 137
A shipowner wishing to enter its fleet of vessels to Steamship must fill
in an application for entry form, which states:
PLEASE ENTER IN THE ASSOCIATION, SUBJECT TO THE RULES,
RECEIPT OF WHICH WE ACKNOWLEDGE, THE UNDERMENTIONED
VESSEL(S). 138
The application form is signed by the shipowner or its authorized
representative.
Steamship then issues a Certificate of Entry and Acceptance of the
vessels, showing its acceptance of the entry. The Certificate of Entry and
Acceptance for M/V Princess of the World states:
CERTIFICATE OF ENTRY AND ACCEPTANCE
by the Club of your proposal for entering the ship(s) specified below,
and
of the tonnage set out against each, in:
Class 1 PROTECTION AND INDEMNITY
of the Club from
Noon 20th February 2005 to Noon 20th February 2006
or until sold, lost, withdrawn or the entry is terminated in accordance
with the rules, to the extent specified and in accordance with the Act,
By(e)-Laws and the Rules from time to time in force and the special
terms specified overleaf.
Your name has been entered in the Register of Members of the Club
as a Member.
FOR ACCOUNT OF CERTIFICATE
Sulpicio Lines, Inc., NUMBER
1st Floor, Reclamation Area, 155,534
P.O. Box No. 137
Cebu City, Philippines.
NAME OF SHIP BUILT ENTERED CLASS PORT OF
GROSS REGISTRY
TONNAGE
THE OCEAN"
THE UNIVERSE"
THE CARIBBEAN"
THE WORLD"
"PRINCESS OF 1984 Cebu City X.X. 19,329
THE STARS" (Rebuilt
1990)
xxx xxx xxx
NOTES
1. REFERENCE IS 2. THE RULES ARE
REQUESTED TO THE PRINTED ANNUALLY IN
RULES AS TO THE BOOK FORM,
CIRCUMSTANCES OF INCORPORATING ALL
ENTRY BEING PREVIOUS ALTERATIONS
CANCELLED AND AS TO AND A COPY IS SENT TO
THE CIRCUMSTANCES OF EACH MEMBER.
AN ALTERATION IN THE ALTERATIONS CAN BE MADE
RULES OR BY(E)-LAWS. BY ORDINARY RESOLUTION
FOLLOWING A GENERAL
MEETING NOTIFIED TO ALL
MEMBERS. 139
Thus, a contract of insurance is perfected between the parties upon
Steamship's issuance of the Certificate of Entry and Acceptance.
[A] contract of insurance, like other contracts, must be assented to by
both parties either in person or by their agents. So long as an
application for insurance has not been either accepted or rejected, it
is merely an offer or proposal to make a contract. The contract, to be
binding from the date of application, must have been a completed
contract, one that leaves nothing to be done, nothing to be
completed, nothing to be passed upon, or determined, before it shall
take effect. There can be no contract of insurance unless the minds of
the parties have met in agreement. 140
Title VI, Section 49 of Presidential Decree No. 612 141 or the Insurance
Code defines an insurance policy as "the written instrument in which a
contract of insurance is set forth." Section 50 of this Code provides that the
policy, which is required to be in printed form, "may contain blank spaces;
and any word, phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance shall be written on the
blank spaces." Any rider, clause, warranty, or endorsement attached and
referred to in the policy by its descriptive title or name is considered part of
this policy or contract of insurance and binds the insured.
Section 51 of the Insurance Code prescribes the information that must
be stated in the policy, namely: the parties in the insurance contract, amount
insured, premium, property or life insured, risks insured against, and period
of insurance. However, there is nothing in the law that prohibits the parties
from agreeing to other terms and conditions that would govern their
relationship, in which case the general rules of the Civil Code regulating
contracts will apply. 142
The Certificate of Entry and Acceptance plainly provides that the Class
1 protection and indemnity coverage would be to the extent specified and in
accordance with the Act, the By-Laws, and the Rules of the Club in force at
the time of the coverage. The "Notes" in the bottom portion of the Certificate
states that these Rules "are printed annually in book form" and disseminated
to all members. M/V Princess of the World was insured from February 20,
2005 to February 20, 2006. Hence, the 2005/2006 Club Rules apply.
Moreover, attached to the Certificate of Entry and Acceptance is a War
Risk Extension clause and Bio-Chem clause, which refer to Rule 21 of the
2005/2006 Club Rules relating to war risk insurance.
WAR RISK EXTENSION
Cover excluded under Rule 21 is hereby reinstated subject to the
terms set out in this Certificate of Entry and any Endorsement
thereto, and to the following conditions.
xxx xxx xxx
At any time or times before, or at the commencement of, or during
the currency of any Policy Year of the Club, the Directors may in their
discretion determine that any ports, places, countries, zones or areas
(whether of land or sea) be excluded from the insurance provided by
this [Protection and Indemnity] war risks cover. Save as otherwise
provided by the Directors, this [Protection and Indemnity] war risks
cover shall cease in respect of such ports, places, countries, zones or
areas at midnight on the seventh day following the issue to the
Members of notice of such determination in accordance with the
terms of the cover provided pursuant to Rule 21 of the Club's Rules . .
.
xxx xxx xxx
Notwithstanding any other term or condition of this insurance, the
Directors may in their discretion cancel this special cover giving 7
days' notice to the Members (such cancellation becoming effective on
the expiry of 7 days from midnight of the day on which notice of
cancellation is issued by the Club and the Directors may at any time
after the issue of notice of such cancellation resolve to reinstate
special cover pursuant to the proviso to the terms of the cover issued
pursuant to Rule 21 on such terms and conditions and subject to such
limit as the Directors in their discretion may determine.
When either a Demise, Time, Voyage, Space or Slot Charterer and/or
the Owner of the Entered Ship are separately insured for losses,
liabilities, or the costs and expenses incidental thereto covered under
Rule 21 of the Club and/or the equivalent Rule of any other
Association which participates in the Pooling Agreement and General
Excess Loss Reinsurance Contract, the aggregate of claims in respect
of such losses, liabilities, or the costs and expenses incidental thereto
covered under Rule 21 of the Club and/or the equivalent Rule of such
other Association(s), shall be limited to the amount set out in the
Certificate of Entry in respect of any one ship, any one incident or
occurrence. 143
Sulpicio's acceptance of the Certificate of Entry and Acceptance
manifests its acquiescence to all its provisions. There is no showing in the
records or in Sulpicio's contentions that it objected to any of the terms in this
Certificate. Its acceptance, likewise, operated as an acceptance of the entire
provisions of the Club Rules.
When a contract is embodied in two (2) or more writings, the writings
of the parties should be read and interpreted together in such a way as to
render their intention effective. 144
With the exception of the War Risk Extension clause, the Bio-chem
clause, and a succinct statement of the limits of liability, warranties,
exclusion, and deductibles, the Certificate of Entry and Acceptance does not
contain the details of the insurance coverage. A person would have to refer
to the Club Rules to have a complete understanding of the contract between
the parties.
The Club Rules contain the terms and conditions of the relationship
between the Steamship and its members including the scope, nature, and
extent of insurance coverage of its members' vessels. The 2005/2006 Club
Rules 145 of Class 1, which cover protection and indemnity risks provide,
insofar as relevant:
3 Scope of Cover
i. The terms upon which a Member is entered in the Club are set
out in the Rules and any Certificate of Entry for that Member.
ii. The risks against which a Member is insured by entry in the Club
are set out in Rule 25 and are always subject to the conditions,
exceptions, limitations and other terms set out in the remainder
of these Rules and any Certificate of Entry for that Member.
xxx xxx xxx
6 Entry
xxx xxx xxx
iv. The provisions of this Rule apply throughout the period of entry
of the Ship in the Club . . .
xxx xxx xxx
8 Members
i. Every Owner who enters any ship in the Club shall (if not already
a Member) be and become a Member of the Club as from the
date of the commencement of such entry. Each Member is bound
by the Act and By(e)-Laws of the Club and by these Rules.
xxx xxx xxx
iv. All contracts of insurance with the Club shall be deemed to be
subject to and incorporate all the provisions of these Rules
except to the extent otherwise expressly agreed in writing with
the Managers.
v. Each Member or other person whose application for insurance or
reinsurance is accepted shall be deemed to have agreed both for
itself and its successors and each of them that both it and they
and each and all of them will be subject to and bound by and will
perform their obligations under the Rules, Act and By(e)-Laws of
the Club and any contract of insurance with the Club.
xxx xxx xxx
45 Amendments to Rules
The Rules of this Class may be altered or added to by Ordinary
Resolution passed at a separate meeting of the Members of this Class
provided that no such alterations shall be effective unless and until
the same shall be sanctioned by the Directors. 146
The 2005/2006 Club Rules also provide the nature of Steamship's
Protection and Indemnity cover and the terms on which it is provided. In
particular, Rule 25 (i) to (xxi) identify a member's liabilities, costs, and
expenses covered by the insurance, Rules 18 to 24 set out the general
exclusions and limitations, Rule 26 provides the requirements for
classification and condition surveys, and Rule 28 addresses general terms
and conditions for recovery of claims. The 2005/2006 Club Rules also contain
provisions on double insurance (Rule 23), claims handling (Rules 30 and 31),
cessation of membership (Rule 35), cessation of insurance of individual
vessels (Rule 36), deduction and set-off (Rule 40), and assignment and
subrogation (Rules 41 and 42).
The arbitration clause is found in Rule 47 of the 2005/2006 Club Rules:
47 Dispute resolution, Adjudication
i. in the event of any difference or dispute whatsoever, between or
affecting a Member and the Club and concerning the insurance
afforded by the Club under these rules or any amounts due from
the Club to the Member or the Member to the Club, such
difference or dispute shall in the first instance be referred to
adjudication by the Directors. That adjudication shall be on the
basis of documents and written submissions alone.
Notwithstanding the terms of this Rule 47i, the Managers shall
be entitled to refer any difference or dispute to arbitration in
accordance with sub-paragraph ii below without prior
adjudication by the Directors.
ii. If the Member does not accept the decision of the Directors, or if
the Managers, in their absolute discretion, so decide, the
difference or dispute shall be referred to the arbitration of three
arbitrators, one to be appointed by each of the parties and the
third by the two arbitrators so chosen, in London. The submission
to arbitration and all the proceedings therein shall be subject to
the provisions of the English Arbitration Act, 1996 and the
schedules thereto or any statutory modifications or re-enactment
thereof.
iii. No Member shall be entitled to maintain any action, suit or other
legal proceedings against the Club upon any such difference or
dispute unless and until the same has been submitted to the
Directors and they shall have given their decision thereon, or
shall have made default for three months in so doing; and, if such
decision be not accepted by the Member or such default be
made, unless and until the difference or dispute shall have been
referred to arbitration in the manner provided in this Rule, and
the Award shall have been published; and then only for such sum
as the Award may direct to be paid by the Club. And the sole
obligation of the Club to the Member under these Rules or
otherwise howsoever in respect of any disputed claim made by
the Member shall be to pay such sum as may be directed by such
an Award.
iv. In any event no request for adjudication by the Member shall be
made to the Directors in respect of any difference or dispute
between, or matter affecting, the Member and the Club more
than two years from the date when that dispute, difference or
matter arose unless, prior to the expiry of this limitation period,
the Managers have agreed in writing to extend the same.
v. Nothing in this Rule 47 including paragraph i, or in any other
Rule or otherwise shall preclude the Club from taking any legal
action of whatsoever nature in any jurisdiction at its absolute
discretion in order to pursue or enforce any of its rights
whatsoever and howsoever arising including but not limited to:
a. Recovering sums it considers to be due from the Member
to the Club;
b. Obtaining security for such sums; and/or
c. Enforcement of its right of lien whether arising by law or
under these rules.
vi. These rules and any contract of insurance between the Club and
the Member shall be governed by and construed in accordance
with English law. 147 (Emphasis in the original)
Under Rule 47, any dispute concerning the insurance afforded by
Steamship must first be brought by a claiming member to the Directors for
adjudication. If this member disagrees with the decision of the Director, the
dispute must be referred to arbitration in London. Despite the member's
disagreement, the Managers of Steamship may refer the dispute to
arbitration without adjudication of the Directors. This procedure must be
complied with before the member can pursue legal proceedings against
Steamship.
There is no ambiguity in the terms and clauses of the Certificate of
Entry Acceptance. Contrary to the ruling of the Court of Appeals, the
Certificate clearly incorporates the entire Club Rules — not only those
provisions relating to cancellation and alteration of the policy. 148
"[W]hen the text of a contract is explicit and leaves no doubt as to its
intention, the court may not read into it any other intention that would
contradict its plain import." 149
The incorporation of the Club Rules in the insurance policy is without
any qualification. This includes the arbitration clause even if not particularly
stipulated. A basic rule in construction is that the entire contract, and each
and all of its parts, must be read together and given effect, with all its
clauses and provisions harmonized with one another. 150
II.C
The Court of Appeals ruled that the arbitration agreement in the

2005/2006 Club Rules is not valid because it was not signed by the parties.
In domestic arbitration, the formal requirements of an arbitration
agreement are that it must "be in writing and subscribed by the party sought
to be charged, or by his lawful agent." 151 In international commercial
arbitration, 152 it is likewise required that the arbitration agreement must be
in writing.
An arbitration agreement is in writing if it is contained (1) in a
document signed by the parties, (2) in an exchange of letters, telex,
telegrams or other means of telecommunication which provide a record of
the agreement, or (3) in an exchange of statements of claim and defense in
which the existence of an agreement is alleged by a party and not denied by
another. The reference in a contract to a document containing an arbitration
clause constitutes an arbitration agreement provided that the contract is in
writing and the reference is such as to make that clause part of the contract.
153
I n BF Corp. v. Court of Appeals, 154 one (1) of the parties denied the
existence of the arbitration clause on the ground that it did not sign the
Conditions of Contract that contained the clause. This Court held that the
arbitration clause was nonetheless binding because the Conditions of
Contract were expressly made an integral part of the principal contract
between the parties. The formal requirements of the law were deemed
complied with because "the subscription of the principal agreement
effectively covered the other documents incorporated by reference [to
them]." 155 In arriving at this ruling, this Court explained:
A contract need not be contained in a single writing. It may be
collected from several different writings which do not conflict with
each other and which, when connected, show the parties, subject
matter, terms and consideration, as in contracts entered into by
correspondence. A contract may be encompassed in several
instruments even though every instrument is not signed by
the parties, since it is sufficient if the unsigned instruments
are clearly identified or referred to and made part of the
signed instrument or instruments. Similarly, a written agreement
of which there are two copies, one signed by each of the parties, is
binding on both to the same extent as though there had been only
one copy of the agreement and both had signed it. 156 (Emphasis
supplied)
Thus, an arbitration agreement that was not embodied in the main
agreement but set forth in another document is binding upon the parties,
where the document was incorporated by reference to the main agreement.
The arbitration agreement contained in the Club Rules, which in turn was
referred to in the Certificate of Entry and Acceptance, is binding upon
Sulpicio even though there was no specific stipulation on dispute resolution
in this Certificate.
Furthermore, as stated earlier, Sulpicio became a member of
Steamship by the very act of making a contract of insurance with it. The
Certificate of Entry and Acceptance issued by Steamship states that "[its]
name has been entered in the Register of Members of the Club as a
Member." 157 Sulpicio admits its membership and the entry of its vessels to
Steamship.
Rule 8 (v) of the 2005/2006 Club Rules provides that:
Each Member or other person whose application for insurance or
reinsurance is accepted shall be deemed to have agreed both for
itself and its successors and each of them that both it and they and
each and all of them will be subject to and bound by and will perform
their obligations under the Rules, Act and By(e)-Laws of the Club and
any contract of insurance with the Club.
Sulpicio's agreement to abide by Steamship's Club Rules, including its
arbitration clause, can be reasonably inferred from its submission of an
application for entry of its vessels to Steamship "subject to the Rules, receipt
of which we acknowledge." 158
The ruling of this Court in Associated Bank v. Court of Appeals 159 is
applicable by analogy to this case.
In that case, plaintiffs sought to recover the amount of 16 checks that
were honored by Associated Bank despite the apparent alterations in the
name of the payee. Associated Bank filed a Third-Party Complaint against
Philippine Commercial International Bank, Far East Bank & Trust Company,
Security Bank and Trust Company, and Citytrust Banking Corporation for
reimbursement, contribution, and indemnity. This Complaint was based on
their being the collecting banks and by virtue of their bank guarantee for all
checks sent for clearing to the Philippine Clearing House Corporation (PCHC).
The trial court dismissed the Third-Party Complaint for lack of jurisdiction,
citing Section 36 of the Clearing House Rules and Regulations of the PCHC,
which provides for arbitration. This Court, in affirming the dismissal, held:
Under the rules and regulations of the Philippine Clearing House
Corporation (PCHC), the mere act of participation of the parties
concerned in its operations in effect amounts to a manifestation of
agreement by the parties to abide by its rules and regulations. As a
consequence of such participation, a party cannot invoke the
jurisdiction of the courts over disputes and controversies which fall
under the PCHC Rules and Regulations without first going through the
arbitration processes laid out by the body. Since claims relating to the
regularity of checks cleared by banking institutions are among those
claims which should first be submitted for resolution by the PCHC's
Arbitration Committee, petitioner Associated Bank, having voluntarily
bound itself to abide by such rules and regulations, is estopped from
seeking relief from the Regional Trial Court on the coattails of a
private claim and in the guise of a third party complaint without first
having obtained a decision adverse to its claim from the said body. It
cannot bypass the arbitration process on the basis of its averment
that its third party complaint is inextricably linked to the original
complaint in the Regional Trial Court.
xxx xxx xxx
Section 36.6 is even more emphatic:
36.6 The fact that a bank participates in the clearing
operations of PCHC shall be deemed its written and
subscribed consent to the binding effect of this arbitration
agreement as if it had done so in accordance with Section
4 of the Republic Act No. 876 otherwise known as the
Arbitration Law.
Thus, not only do the parties manifest by mere participation
their consent to these rules, but such participation is deemed (their)
written and subscribed consent to the binding effect of arbitration
agreements under the PCHC rules. Moreover, a participant subject to
the Clearing House Rules and Regulations of the PCHC may go on
appeal to any of the Regional Trial Courts in the National Capital
Region where the head office of any of the parties is located only after
a decision or award has been rendered by the arbitration committee
or arbitrator on questions of law. 160 (Emphasis supplied, citation
omitted)
This Court held that mere participation by the banks in the clearing
operations of the PCHC manifest their consent to the PCHC Rules, including
the binding effect of the arbitration agreements under these Rules.
In this case, by its act of entering its fleet of vessels to Steamship and
accepting without objection the Certificate of Entry and Acceptance covering
its vessels, Sulpicio manifests its consent to be bound by the Club Rules. The
contract between Sulpicio and Steamship gives rise to reciprocal rights and
obligations. Steamship undertakes to provide protection and indemnity
cover to Sulpicio's fleet. On the other hand, Sulpicio, as a member, agrees to
observe Steamship's rules and regulations, including its provisions on
arbitration.
III.A

The Court of Appeals' finding that there was no proof that Sulpicio was
given a copy of the 2005/2006 Club Rules is contradicted by the evidence on
record.
In its Comment, Sulpicio contends that it "was never given or sent a
copy" of the Rulebook as stated in the affidavits of its Executive Vice
President, Atty. Eusebio S. Go and its Safety and Quality Assurance Manager,
Engr. Ernelson P. Morales. 161 It also quoted a portion of the Affidavit of its
Executive Vice President and Chief Executive Officer, Carlos S. Go, who
declared that "[Sulpicio] and Steamship have not signed any arbitration
agreement" and "[n]o such agreement exists." 162
Sulpicio cannot feign ignorance of the arbitration clause since it was
already charged with notice of the Club Rules due to an appropriate
reference to it in the Certificate of Entry and Acceptance. Assuming its
contentions were true that it was not furnished a copy of the 2005/2006 Club
Rules, by the exercise of ordinary diligence, it could have easily obtained a
copy of them from Pioneer Insurance or Seaboard-Eastern.
In any case, Sulpicio's bare denials cannot succeed in light of the
preponderance of evidence submitted by Steamship.
The Affidavit 163 dated August 29, 2007 of Jonathan Andrews, Director
and Head of Underwriting of the Eastern Syndicate of the Managers of
Steamship and in charge of Steamship's Far East membership, including the
Philippines, stated:
4. The contract of insurance between the Club and a Member is
contained in, and evidenced by:
a) The Rules of the Club for whichever Class or Classes the
vessel is entered, for the time being in force; and
b) A Certificate of Entry.
xxx xxx xxx
5. The Club's policy year runs from noon on 20th February of each
year until noon on 20th February of the year following . . . The
Rule book is published on an annual basis prior to the
commencement of the Policy year to which it applies. Although
the Rules can be amended pursuant to Rule 45, the dispute
resolution provisions of the Rules have provided for arbitration in
London since well before the Plaintiff's entry in the Club.
xxx xxx xxx
10. In addition, it is quite clear that throughout their lengthy
membership of the Club, the Plaintiffs were aware of, and relied
upon, the terms of the Club's Rules. Produced and shown to me,
marked "JHDA 4," is a copy of a letter 164 from the Plaintiffs,
dated 4th June, 1993, seeking a refund of premium for the
"SURIGAO PRINCESS" on the grounds that the vessel was laid up.
That letter's enclosures consist of:
(a) The Club's printed form for returns of premium when a
vessel is laid-up . . . signed by Mr. Carlos S. Go on behalf of
the Plaintiffs;

(b) A Photocopy of the relevant provision in the Club's Rules
dealing with laid-up returns, Rule 29; and
(c) A Certificate from the Philippines Port Authority . . .
The fact that Sulpicio's application for a laid-up return attached a
photocopy of the Club's Rule book demonstrates both that this
was physically in their possession and that they were familiar
with its contents.
11. Throughout the lengthy period of this entry, as might be
anticipated, there was a considerable volume of correspondence
between the Plaintiffs and the Club via the former's brokers.
Examples of that correspondence are produced and shown to
me, marked "JHDA 5." As the Court will note from that
correspondence, it contains numerous and frequent references
to various of the Club's Rules, e.g.:
• Rule 22, dealing with double insurance
• Rule 25 xix, dealing with towage
• Rule 23 i, dealing with classification
• Rule 23 v b and c, dealing with defect warranties
• Rule 23 iv, dealing with safety audits.
xxx xxx xxx
12. The fact that Plaintiffs possessed and were fully conversant
with the Club's Rules is most clearly demonstrated by the
correspondence provided and shown to me, marked "JHDA 6."
After the grounding of the "PRINCESS OF THE PACIFIC," due to
the concerns arising out of this casualty, the Club initially
reserved cover pending further investigation and required an
independent audit of the Plaintiff's Safety Management System.
When this decision was conveyed to the Plaintiffs via their
brokers, Seaboard-Eastern, they replied:
As expected, Carlos Go was so upset and
expressed disappointment when the undersigned
spoke to him about the report of Noble Denton and
the club's decision to suspend any action on the
claim especially so since owners believe the
findings of the surveyors to the club are inaccurate
and after relating such findings to the club rules
owners find no basis for club's decision to suspend
action on the claim. 165
Roderick Gil Narvacan, Vice-President of the Hull Unit of Pioneer
Insurance which handled Sulpicio's account, also narrated in his Affidavit 166
dated September 4, 2007:
7. I know for a fact that Sulpicio received a copy of the
Club's Rule Book and had full knowledge of the Club's Rules during
the length of time that it was a member of the Club.
8. [I]n all Entry Forms signed and submitted by Sulpicio to
the Club throughout its years of membership in the Club, Sulpicio
always acknowledged that it received a copy of Club's Rule Book. A
sample of Sulpicio's duly signed Entry Form submitted to the Club on
6 February 1997 is hereto attached as Annex "1."
9. The Company, through my department, also makes it a
point to remind all the Club's Members including Sulpicio to
familiarize themselves with the Club's Rulebook as the rules therein
provided are applied to all Club related matters including claims
procedures. A copy of Ms. May Valles' email 167 to Sulpicio dated 27
August 2002 is hereto attached as Annex "2" and her letter 168 to
Sulpicio dated 17 October 2002 is hereto attached as Annex "3." Ms.
Valles was a former member of the Company's Hull Department and
in both written communications, she reminded Sulpicio through its
Executive Vice-President and CFO Mr. Carlos S. Go of certain Club
Rules such as the prescriptive period to claim for lay-up premium
refund.
10. In reply to the 27 August 2002 email, Mr. Carlos S. Go,
by a 28 August 2002 email 169 to Ms. Valles, explained his
understanding of the provision on the prescriptive period to claim for
lay-up premium refund under the Club's Rules, thereby clearly
showing that Sulpicio was aware of the Club's Rules. A copy of the 28
August 2002 email of Mr. Go is hereto attached as Annex "4."
11. To further prove Sulpicio's knowledge of Club's Rules, I
hereto attach the following copies of letters from Sulpicio addressed
to the Company with attached letter by Sulpicio to the Club:
• Letter-request 170 for refund of lay-up premiums for the
vessel M/V Surigao Princess dated 4 June 1993 as Annex
"5";
vessel M/V Manila Princess dated 10 June 1998 as Annex
"6";
vessel M/V Filipina Princess dated 21 June 1999 as Annex
"7";
vessel M/V Manila Princess dated 17 May 2001 as Annex
"8"; and
vessel M/V Nasipit Princess dated 16 August 2002 as Annex
"9";
In each of the above letters, Sulpicio declared to both the Company
and the Club that "(w)e shall therefore be glad to receive a credit
note for the return of premium under the Rules of the Association."
175 (Emphasis in the original)
Finally, Elmer Felipe, Manager of Marine Department of Seaboard-

Eastern in charge of Sulpicio's account, also narrated:
11. As insurers for the Hull & Machinery of Sulpicio's Fleet,
the Company, through my department, assisted Sulpicio in regard to
its [Protection and Indemnity] cover by sending copy of the Club's
Rulebook while it was an active Member of the Club.
12. By way of example, in the year 2002, the Company sent
five (5) copies of the Club's Rulebook to Mr. Carlos S. Go, Executive
Vice-President and CEO of Sulpicio as evidenced by a transmittal
letter dated 11 April 2002 duly signed by the Company's First Vice-
President Joli Co-Wu. A copy of said transmittal letter 176 dated 11
April 2002 is hereto attached as Annex "1."
13. The other transmittal letters proving distribution of the
Club's Rulebook to Sulpicio in its other years of membership with the
Club were among those discarded by the Company when it moved . . .
to a smaller office . . .
14. [Sulpicio is presumed to] know the Club's Rules as it was
provided with copies of the Rulebook on an annual basis.
15. In fact, in a 8 May 2004 letter addressed to the
Company, Sulpicio claimed for refund of lay-up premiums from the
Club in connection with the vessel M/V Princess of the World and in
Sulpicio's letter to the Club attached to the said 8 May 2004 letter,
Sulpicio declared that "(w)e shall therefore be glad to receive a credit
note for the return of premium under the Rules of the Association."
This was followed by a 8 December 2004 letter for refund of lay-up
returns for the vessel M/V Princess of the World where Sulpicio also
invoked the Club Rules. A copy of the 8 May 2004 letter 177 with
attachment is hereto attached as Annex "2" and a copy of the 8
December 2004 letter 178 is hereto attached as Annex "3."
xxx xxx xxx
18. More importantly, after the Club denied cover for the
vessel M/V Princess of the World and prior to the date when the
termination of Sulpicio's entry in the Club took effect, our EVP, Mr.
Jose G. Banzon, Jr. sent an email 179 dated 30 November 2005 to Mr.
Carlos Go reminding Sulpicio of the remedy of voluntary arbitration
under Rule 47 of the Club's Rulebook and attaching a copy of Rule 47.
Copies of these documents are attached as Annex "4." 180
These foregoing affidavits and the attached supporting documents
consistently declared that Sulpicio was given copies of the Rulebook on an
annual basis and had even invoked its provisions in making a claim from
Steamship, Sulpicio's previous letters to Steamship referring to provisions of
the Club Rules show its knowledge. Sulpicio was also reminded of the
arbitration clause during the negotiations preceding the institution of the
present case.
"[A] party is not relieved of the duty to exercise the ordinary care and
prudence that would be exacted in relation to other contracts. The
conformity of the insured to the terms of the policy is implied from [its]
failure to express any disagreement with what is provided for." 181 The
agreement to submit all disputes to arbitration is a long standing provision in
the Club Rules. It was incumbent upon Sulpicio to familiarize itself with the
Club Rules, under the presumption that a person takes due care of its
concerns. Being a member of Steamship for 20 years, 182 it has been bound
by its Rules and has been expected to abide by them in good faith.
I n Development Bank of the Philippines v. National Merchandising
Corp., 183 the parties, who were acute businessmen of experience, were
presumed to have assented to the assailed documents with full knowledge:
The principal stockholders and officers of NAMERCO, particularly the
Sycips who co-signed the promissory notes in question, were, as the
lower court found, businessmen of experience and intelligence . . .
We might say — paraphrasing Tin Tua Sia vs. Yu Biao Sontua , 56 Phil.
707 — that they being of age and businessmen of experience, it must
be presumed that they had acted with due care and to have signed
the documents in question with full knowledge of their import and the
obligations they were assuming thereby; that this presumption of law
may not be overcome by the mere testimony of the obligor or
obligors; that, to permit a party, when, sued upon a contract, to admit
that he signed it but to deny that it expresses the agreement he had
made, or to allow him to admit that he signed it solely on the verbal
assurance given by one party, however high his station may be, that
he would not be held liable thereon, would destroy the value of all
contracts. Indeed, it would be disastrous to give more weight and
reliability to the self-serving testimony of a party bound by the
contract than to the contents thereof. Verba volant, scripta manent.
184
Sulpicio is estopped from denying knowledge of the Rulebook by its

own acts and representations, as evidenced by its various letters to
Steamship, showing its familiarity with the Rulebook and its provisions.
"In estoppel, a person, who by his [or her] deed or conduct has induced
another to act in a particular manner, is barred from adopting an
inconsistent position, attitude or course of conduct that thereby causes loss
or injury to another." 185 It further bars a party from denying or disproving a
fact, which has become settled by its acts. 186
Hence, this Court finds a preponderance of evidence showing that
Sulpicio was given a copy and had knowledge of the 2005/2006 Club Rules.
Moreover, the 2005/2006 Club Rules' provision on arbitration is valid and
binding upon Sulpicio.
III.B
The Regional Trial Court should suspend proceedings to give way to

arbitration. Even if there are other defendants who are not parties to the
arbitration agreement, arbitration is still proper.
Republic Act No. 9285 was approved on April 2, 2004 and was the
controlling law at the time the original and amended complaints were filed.
Section 25 of Republic Act No. 9285 is explicit that:
[W]here action is commenced by or against multiple parties, one or
more of whom are parties to an arbitration agreement, the court shall
refer to arbitration those parties who are bound by the arbitration
agreement although the civil action may continue as to those who are
not bound by such arbitration agreement.
Rule 4.7 of the Special Rules on Alternative Dispute Resolution 187
(2009 Special ADR Rules) further expresses:
The court shall not decline to refer some or all of the parties to
arbitration for any of the following reasons:
a. Not all of the disputes subject of the civil action may be
referred to arbitration;
b. Not all of the parties to the civil action are bound by the
arbitration agreement and referral to arbitration would
result in multiplicity of suits;
c. The issues raised in the civil action could be speedily and
efficiently resolved in its entirety by the court rather than
in arbitration;
d. Referral to arbitration does not appear to be the most
prudent action; or
e. The stay of the action would prejudice the rights of the
parties to the civil action who are not bound by the
arbitration agreement.
The present rule on multiple parties manifests due regard to the policy
of the law in favor of arbitration. In light of the express mandate of Republic
Act No. 9285 and the subsequent 2009 Special ADR Rules, this Court's ruling
i n European Resources and Technologies, Inc. v. Ingenieuburo Birkhahn +
Nolte, Ingeniurgesellschaft Gmbh 188 is deemed abrogated.
Notably, the Regional Trial Court did not rule on whether or not a valid
and existing arbitration agreement existed between the parties. It merely
stated in its Order, citing European Resources, that:
["]Even if there is an arbitration clause, there are instances when
referral to arbitration does not appear to be the most prudent action.
The object of arbitration is to allow the expeditious determination of a
dispute. Clearly, the issue before us could not be speedily and
efficiently resolved in its entirety if we allow simultaneous arbitration
proceedings and trial, or suspension of trial pending arbitration."
Moreover, it is noted that defendants Seaboard-Eastern
Insurance Co., Inc. and Pioneer Insurance and Surety Corporation
already filed their respective Answers to the second amended
complaint. 189
On this basis, the Regional Trial Court denied Steamship's Motion to
Dismiss and/or to Refer Case to Arbitration and directed it to file an answer.
This Court finds that the Regional Trial Court acted in excess of its
jurisdiction.
Where a motion is filed in court for the referral of a dispute to
arbitration, Section 24 of Republic Act No. 9285 ordains that the dispute
shall be referred "to arbitration unless it finds that the arbitration agreement
is null and void, inoperative or incapable of being performed."
Thus, the Regional Trial Court went beyond its authority of determining
only the issue of whether or not there was a valid arbitration agreement
between the parties when it denied Steamship's Motion to Dismiss and/or to
Refer Case to Arbitration solely on the ground that it would not be the most
prudent action under the circumstances of the case. The Regional Trial Court
went against the express mandate of Republic Act No. 9285. Consequently,
the Court of Appeals erred in finding no grave abuse of discretion on the part
of the trial court in denying referral to arbitration.
IV
In G.R. No. 208603, Sulpicio contends that Steamship's acts were

contumacious because they were intended to defeat Civil Case No. 07-577
and oust the Regional Trial Court of its jurisdiction, without the approval of
this Court.
Sulpicio further contends that there was no valid off-setting of the
amount of US$69,570.99 from the refund payable to it in the Unabia case
because the issue on the propriety of the referral to arbitration had yet to be
resolved by this Court. 190 It adds that the "arbitration — anti-suit injunction"
cost was not a debt of Sulpicio but a unilateral charge arising from an
arbitration that it had not participated in, or was enforceable in the
Philippines. 191
In its Comment/Opposition 192 to the Petition for Indirect Contempt,
Steamship contends that it "exercised its right to set-off in good faith" 193
and that the amount set-off represents costs of obtaining the Anti-Suit
Injunction awarded to it by the English Commercial Court and are not
arbitration costs as contended by Sulpicio. 194 It also holds that Sulpicio's
prayer for restitution of the offset amount was improper in a petition for
indirect contempt. 195
Steamship emphasizes that even before the denial of its Motion to
Dismiss in Civil Case No. 07-577 on July 11, 2008, it already commenced
arbitration in London 196 on July 31, 2007. 197 It had also "obtained a
permanent Anti-Suit Injunction [with interim award for costs] 198 from the
English Commercial Court on 4th April 2008[.]" 199 The April 4, 2008 Order
enjoined Sulpicio from proceeding with Civil Case No. 07-577 and to refer the
dispute to arbitration in London. 200
Steamship further avers that "Sulpicio was served a copy of an Order
to file Claims Submissions in the London arbitration and a copy of the Anti-
Suit Injunction but it refused to participate in, the London Arbitration." 201 It
also did not pay the costs of the Anti-Suit Injunction. Sulpicio refused
"service of all orders, notices, pleadings and documents related to the
London arbitration and the Commercial Court proceedings." 202
Steamship adds that in 2012, Sulpicio filed a claim for reimbursement
of US$96,958.47 representing passenger liabilities arising from the capsizing
of one (1) of Sulpicio's fleet in 1998. 203 Pursuant to Rule 32 of the Club
Rules for the 1998 policy, which gave Steamship "the right to make
deduction 'from any claims . . . due to a Member' of 'any liabilities of such
Member to the Club,'" 204 Steamship set-off the costs awarded by the English
Commercial Court from the amount reimbursed to Sulpicio. Sulpicio's brokers
and lawyers were informed of the set-off through an email dated December
3, 2012. 205
Steamship contends that there was no legal impediment when it
initiated arbitration proceedings in London. 206 The action was taken in good
faith to preserve its rights while defending its position that Sulpicio's filing of
Civil Case No. 07-577 constituted a breach of the Club Rules. 207 On the
other hand, Sulpicio's acts were far from desirable for it did not only fail to
participate in the London arbitration proceedings but also evaded service of
all notices "so that it could feign ignorance of the existence of arbitration
proceedings." 208
This Court finds Sulpicio's arguments to be untenable.
Steamship's commencement of arbitration even before the Regional
Trial Court had ruled on its motion to dismiss and suspend proceedings does
not constitute an "improper conduct" that "impede[s], obstruct[s] or
degrade[s] the administration of justice." 209
In Heirs of Trinidad de Leon vda. de Roxas v. Court of Appeals, 210 this
Court explained the concept of contempt of court:
Contempt of court is a defiance of the authority, justice or
dignity of the court; such conduct as tends to bring the authority and
administration of the law into disrespect or to interfere with or
prejudice parties litigant or their witnesses during litigation . . .
Contempt of court is defined as a disobedience to the Court by
acting in opposition to its authority, justice and dignity. It signifies not
only a willful disregard or disobedience of the court's orders, but such
conduct as tends to bring the authority of the court and the
administration of law into disrepute or in some manner to impede the
due administration of justice . . .
This Court has thus repeatedly declared that the power to
punish for contempt is inherent in all courts and is essential to the
preservation of order in judicial proceedings and to the enforcement
of judgments, orders, and mandates of the court, and consequently,
to the due administration of justice . . . 211
The court's contempt power should be exercised with restraint and for
a preservative, and not a vindictive, purpose. "Only in cases of clear and
contumacious refusal to obey should the power be exercised." 212
I n Lorenzo Shipping Corporation v. Distribution Management
Association of the Philippines, 213 this Court held that:
There is no question that in contempt the intent goes to the
gravamen of the offense. Thus, the good faith, or lack of it, of the
alleged contemnor should be considered. Where the act complained
of is ambiguous or does not clearly show on its face that it is
contempt, and is one which, if the party is acting in good faith, is
within his rights, the presence or absence of a contumacious intent is,
in some instances, held to be determinative of its character. A person
should not be condemned for contempt where he contends for what
he believes to be right and in good faith institutes proceedings for the
purpose, however erroneous may be his conclusion as to his rights.
To constitute contempt, the act must be done willfully and for an
illegitimate or improper purpose. 214 (Citations omitted)
I n Lim-Lua v. Lua , 215 the father's deferral in giving monthly support
pendente lite granted by the trial court was held not contumacious,
considering that "he had not been remiss in actually providing for the needs
of his children." It was also taken into account that he "believed in good faith
that the trial and appellate courts, upon equitable grounds, would allow him
to offset the substantial amounts he had spent or paid directly to his
children." This Court explained:
Contempt of court is defined as a disobedience to the court by
acting in opposition to its authority, justice, and dignity. It signifies
not only a willful disregard or disobedience of the court's order, but
such conduct which tends to bring the authority of the court and the
administration of law into disrepute or, in some manner, to impede
the due administration of justice. To constitute contempt, the act
must be done willfully and for an illegitimate or improper purpose.
The good faith, or lack of it, of the alleged contemnor should be
considered. 216
This Court finds no clear and contumacious conduct on the part of
Steamship. It does not appear that Steamship was motivated by bad faith in
initiating the arbitration proceedings. Rather, its act of commencing
arbitration in London is but a bona fide attempt to preserve and enforce its
rights under the Club Rules.
There was no legal impediment at the time Steamship initiated London
arbitration proceedings. Steamship commenced arbitration on July 31, 2007
even before the Regional Trial Court denied its Motion to Dismiss and/or
Refer Case to Arbitration on July 11, 2008. There was no order from the
Regional Trial Court enjoining Steamship from initiating arbitration
proceedings in London. Besides, the 2009 Special ADR Rules specifically
provided that arbitration proceedings may be commenced or continued and
an award may be made, while, the motion for the stay of civil action and for
referral to arbitration is pending resolution by the court. 217
This Court notes that while the arbitration proceeding was commenced
as early as July 31, 2007, it is only six (6) years later that Sulpicio filed its
Petition 218 to cite Steamship for indirect contempt. Sulpicio cannot invoke
lack of knowledge of the London arbitration proceedings due to several
reasons. First, it received and replied 219 to the notice of commencement of
arbitration proceedings 220 dated July 31, 2007. Second, Steamship
presented evidence showing Sulpicio's refusal to receive any notices, orders,
or communications related to the arbitration proceedings. Lastly, the
pendency of the London arbitration was made known to the Court of Appeals
and this Court through Steamship's petitions. Sulpicio's belated filing of its
Petition, only after Steamship has deducted from the refund due it the
alleged "arbitration costs," indicates its lack of sincerity and good faith.
Finally, this Court finds Sulpicio's claim for damages to be improperly
raised. It should be addressed in an ordinary civil action. Its petition for
indirect contempt is not the proper action to determine the validity of the
set-off and to make a factual determination relating to the propriety of
ordering restitution.
WHEREFORE, the Petition for Review in G.R. No. 196072 is
GRANTED. The Decision dated November 26, 2010 of the Court of Appeals
in CA-G.R. SP No. 106103 and the Order dated July 11, 2008 of the Regional
Trial Court, Branch 149, Makati City in Civil Case No. 07-577 are SET ASIDE.
The dispute between Sulpicio Lines, Inc. and Steamship Mutual Underwriting
(Bermuda) Limited is referred to arbitration in London in accordance with
Rule 47 of the 2005/2006 Club Rules.
The Petition for Indirect Contempt in G.R. No. 208603 is DISMISSED
for lack of merit.
SO ORDERED.
Velasco, Jr., Bersamin and Martires, JJ., concur.
Gesmundo, * J., is on official leave.
Footnotes
* On official leave.
1. Rollo (G.R. No. 196072), pp. 35-90.

2. Id. at 93-108. The Decision was penned by Associate Justice Ramon M. Bato, Jr.
and concurred in by Associate Justices Juan Q. Enriquez, Jr. and Florito S.
Macalino of the Sixth Division, Court of Appeals, Manila.
3. Id. at 111-112. The Resolution was penned by Associate Justice Ramon M. Bato,
Jr. and concurred in by Associate Justices Juan Q. Enriquez, Jr. and Florito S.
Macalino of the Sixth Division, Court of Appeals, Manila.
4. Rollo (G.R. No. 208603), pp. 3-12.
5. Id. at 9.
6. Rollo (G.R. No. 196072), pp. 93-94.
7. Id. at 117.
8. Id.
9. Id. at 130.
10. Id. at 94.
11. Id.
12. Id. at 116-128.
13. Id. at 561-574.
14. Id. at 95-97.
15. Id. at 529-541.

16. Id. at 542 and 1592. Rule 47 of the 2005/2006 Club Rules provides:
47 Dispute resolution, Adjudication

i. In the event of any difference or dispute whatsoever, between or affecting
a Member and the Club and concerning the insurance afforded by the Club
under these rules or any amounts due from the Club to the Member or the
Member to the Club, such difference or dispute shall in the first instance be
referred to adjudication by the Directors. That adjudication shall be on the
basis of documents and written submissions alone. Notwithstanding the
terms of this Rule 47i, the Managers shall be entitled to refer any difference
or dispute to arbitration in accordance with sub-paragraph ii below without
prior adjudication by the Directors.
ii. If the Member does not accept the decision of the Directors, or if the
Managers, in their absolute discretion, so decide, the difference or dispute
shall be referred to the arbitration of three arbitrators, one to be appointed
by each of the parties and the third by the two arbitrators so chosen, in
London. The submission to arbitration and all the proceedings therein shall
be subject to the provisions of the English Arbitration Act, 1996 and the
schedules thereto or any statutory modifications or re-enactment thereof.
iii. No Member shall be entitled to maintain any action, suit or other legal
proceedings against the Club upon any such difference or dispute unless and
until the same has been submitted to the Directors and they shall have given
their decision thereon, or shall have made default for three months in so
doing; and, if such decision be not accepted by the Member or such default
be made, unless and until the difference or dispute shall have been referred
to arbitration in the manner provided in this Rule, and the Award shall have
been published; and then only for such sum as the Award may direct to be
paid by the Club. And the sole obligation of the Club to the Member under
these Rules or otherwise howsoever in respect of any disputed claim made
by the Member shall be to pay such sum as may be directed by such an
Award.
iv. In any event no request for adjudication by the Member shall be made to
the Directors in respect of any difference or dispute between, or matter
affecting, the Member and the Club more than two years from the date when
that dispute, difference or matter arose unless, prior to the expiry of this
limitation period, the Managers have agreed in writing to extend the same.
v. Nothing in this Rule 47 including paragraph i, or in any other Rule or
otherwise shall preclude the Club from taking any legal action of whatsoever
nature in any jurisdiction at its absolute discretion in order to pursue or
enforce any of its rights whatsoever and howsoever arising including but not
limited to:
a. Recovering sums it considers to be due from the Member to the Club;
b. Obtaining security for such sums; and/or

c. Enforcement of its rights of lien whether arising by law or under these
rules.
vi. These rules and any contract of insurance between the Club and the
Member shall be governed by and construed in accordance with English law.
(Emphasis in the original)
17. Id. at 97-98.

18. Id. at 98.
19. Id. at 300-302. The Order was issued by Presiding Judge Cesar O. Untalan.
20. Id. at 301.
21. 479 Phil. 114 (2004) [Per J. Ynares-Santiago, First Division].
22. Rollo (G.R. No. 196072), p. 99.
23. Id. at 304-320.

24. Id. at 303. The Order was issued by Presiding Judge Cesar O. Untalan.
25. Id. at 93.
26. Id. at 93-108.

27. Id. at 107.
28. Id. at 105.
29. Id. at 111-112.

30. Id. at 2161.
31. Id. at 2169-2198.
32. Id. at 2212-2233.

33. Rollo (G.R. No. 208603), pp. 3-12.
34. Id. at 6.
35. Id.
36. Id. at 6-7.

37. Id. at 4.
38. Id. at 8.
39. Id. at 42-61.

40. Id. at 363-373.
41. Id. at 186.
42. Rollo (G.R. No. 196072), p. 2183.

43. Id. at 2182-2183.
44. Id. at 2169-2171.
45. Id. at 2173.
46. Id. at 2215-2216.

47. Id. at 2234-2236.
48. Id. at 2237-2239.
49. The Secretary's Certificate refers to "J.C.R. Collis" whose full name is found in
rollo (G.R. 196072), p. 2242.
50. Rollo , pp. 2218-2220.
51. Id. at 2219.
52. Id. at 2219-2220.
53. Office of the Ombudsman v. Court of Appeals, 493 Phil. 63, 74 (2005) [Per J.
Chico-Nazario, Second Division].
54. Malayang Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations
Commission , 716 Phil. 500, 513 (2013) [Per J. Leonardo-de Castro, First
Division] citing Bugarin v. Palisoc, 513 Phil. 59 (2005) [Per J. Quisumbing,
First Division]; Mercado v. Court of Appeals, 245 Phil. 49 (1988) [Per J.
Narvasa, First Division].
55. 438 Phil. 408 (2002) [Per J. Bellosillo, Second Division].
56. Id. at 415.
57. Rollo (G.R. No. 196072), p. 2218.

58. G.R. Nos. 173137 & 173170, January 11, 2016
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/january2016/173137.pdf> [Per J. Leonen, Second
Division].
59. G.R. No. 172843, September 24, 2014
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2014/september2014/172843.pdf> [Per J. Leonen,
Second Division].
60. Id. at 8.
61. Rollo (G.R. No. 196072), p. 105.
62. Microsoft Corp. v. Farajallah, 742 Phil. 775, 785 (2014) [Per Acting C.J. Carpio,
Second Division].
63. Chan v. Maceda, 450 Phil. 416-431 (2003) [Per J. Sandoval-Gutierrez, Third
Division]; Verendia v. Court of Appeals, 291 Phil. 439-448 (1993) [Per J. Melo,
Third Division].
64. Insular Life Assurance Company, Ltd. v. Court of Appeals, 472 Phil. 11-36
(2004) [Per J. Austria-Martinez, Second Division].
65. Rollo (G.R. No. 196072), pp. 863-865; 923-932; 937-940.
66. Id. at 797-807.

67. Id. at 914-915.
68. Id. at 933-935.
69. RULES OF COURT, Rule 45, sec. 1.

70. RULES OF COURT, Rule 45, sec. 4 (e).
75. BA Savings Bank v. Sia, 391 Phil. 370, 377-378 (2000) [Per J. Panganiban, Third
Division]; Ty-de Zuzuarregui v. Villarosa , 631 Phil. 375, 384 (2010) (Per J.
Villarama, Jr., First Division].
76. BA Savings Bank v. Sia, 391 Phil. 370, 377-378 (2000) [Per J. Panganiban, Third
Division].
77. Rollo (G.R. No. 196072), pp. 83-87.
78. Id. at 87.
79. Id. at 2169-2170.

80. Id. at 2212-2233.
81. Id. at 2236 & 2239.
82. Id. at 2215.

83. Uy v. Land Bank of the Phils., 391 Phil. 303, 312 (2000) [Per J. Kapunan, First
Division].
84. Spouses Lim v. Court of Appeals, 702 Phil. 634, 642-643 (2013) [Per J. Brion,
Second Division].
85. Gonzales v. Climax Mining Ltd., 492 Phil. 682, 691 (2005) [Per J. Tinga, Second
Division]; BPI Leasing Corporation v. Court of Appeals, 461 Phil. 451, 457
(2003) [Per J. Azcuna, First Division].
86. Uy v. Court of Appeals, 769 Phil. 705, 716-717 (2015) [Per J. Jardeleza, Third
Division].
87. Id. citing Far Eastern Shipping Company v. Court of Appeals, 357 Phil. 703
(1998) [Per J. Regalado, En Banc], Sy Chin v. Court of Appeals , 399 Phil. 442
(2000) [Per J. Kapunan, First Division], LDP Marketing, Inc. v. Monter, 515
Phil. 768 (2006) [Per J. Carpio Morales, Third Division]; Uy v. Land Bank of the
Phils., 391 Phil. 303 (2000) [Per J. Kapunan, First Division].
88. Pascual and Santos, Inc. v. The Members of the Tramo Wakas Neighborhood
Association, Inc., 485 Phil. 113, 122 (2004) [Per J. Carpio Morales, Third
Division] citing Novelty Philippines, Inc. v. Court of Appeals, 458 Phil, 36
(2003) [Per J. Panganiban, Third Division], National Steel Corporation v. Court
of Appeals, 436 Phil. 656 (2002) [Per J. Austria-Martinez, First Division], BA
Savings Bank v. Sia, 391 Phil. 370 (2000) (Per J. Panganiban, Third Division].
89. 404 Phil. 981 (2001) [Per J. Melo, Third Division].
90. Id. at 996.
91. Rollo (G.R. No. 196072), p. 2215.
92. Id. at 2216.

93. National Steel Corporation v. Court of Appeals, 436 Phil. 656, 667 (2002) [Per J.
Austria-Martinez, First Division].
94. Rollo (G.R. No. 196072), pp. 51-54.
95. Id. at 48-51.
96. 351 Phil. 507 (1998) [Per J. Romero, Third Division].

97. Rollo (G.R. No. 196072), pp. 67-68.
98. Id. at 789-793.
99. Id. at 54-55.

100. Id. at 59.
101. Id. at 56.
102. Id. at 59-60, 62-66.

103. Id. at 56.
104. Id. at 70-71.

106. Rollo (G.R. No. 196072), pp. 72-73.
107. Id. at 74.
108. Id. at 77-78.
109. Id. at 80.

110. Id. at 78.
111. Id. at 80.
112. Id.
113. Id. It appears that Steamship had already initiated arbitration proceedings in
London per its letter dated July 31, 2007 to Sulpicio, which gave notice of its
appointment of an arbitrator and for Sulpicio to appoint its own arbitrator.
(rollo, pp. 432-433)
114. Id. at 2184-2185.
115. Id. at 2173-2176.
116. Id. at 2185.

117. Id. at 2186.
118. Id. at 2189.
119. Id. at 2193.

120. Id. at 2193-2194.
121. Id. at 2227-2228.
122. Id. at 2228.
123. Id. at 2229.
124. Id. at 2230.
125. Id. at 2230.

126. Bases Conversion Development Authority v. DMCI Project Developers, Inc. ,
G.R. Nos. 173137 & 173170, January 11, 2016
<http://scjudiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/january2016/173137.pdf> 9 [Per J. Leonen, Second
Division].
127. Chung Fu Industries (Philippines), Inc. v. Court of Appeals, 283 Phil. 474, 483
(1992) [Per J. Romero, Third Division] citing CIVIL CODE, art. 1306.
128. An Act to Institutionalize the Use of an Alternative Dispute Resolution System
in the Philippines and to Establish the Office for Alternative Dispute
Resolution, and for Other Purposes, known as the Alternative Dispute
Resolution Act of 2004.
129. CIVIL CODE, Title XIV, Chapter 2.
130. See National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen

Philippines, Inc., 263 Phil. 634 (1990) [Per J. Melencio-Herrera, Second
Division].
131. Rep. Act No. 9285, secs. 43 and 42, pars. 1 and 2.
132. Bases Conversion Development Authority v. DMCI Project Developers, Inc. ,
G.R. Nos. 173137 and 173170, January 11, 2016 <htt://
sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/january2016/173137.pdf> 9 [Per J. Leonen, Second
Division].
133. Id. at 10.
134. LM Power Engineering Corporation v. Capitol Industrial Construction Groups,
Inc., 447 Phil. 705, 714 (2003) [Per J. Panganiban, Third Division].
135. Hyopsung Maritime Co., Ltd. v. Court of Appeals, 247-A Phil. 350, 351 (1988)
[Per J. Sarmiento, Second Division].
136. 502 Phil. 692 (2005) [Per J. Quisumbing, First Division].
137. Id. at 699-700.
138. Rollo (G.R. No. 196072), p. 809.

139. Id. at 130.
140. Perez v. Court of Appeals, 380 Phil. 592, 600-601 (2000) [Per J. Ynares-
Santiago, First Division].
141. Several amendments to Presidential Decree No. 612 (1974) were consolidated
and codified into a single Code by virtue of Presidential Decree No. 1460, to
be known as the Insurance Code of 1978.
142. CIVIL CODE, art. 2011.

143. Rollo (G.R. No. 196072), p. 133.
144. Valdez v. Court of Appeals , 482 Phil. 250, 271 (2004) [Per J. Callejo, Sr.,
Second Division].
145. Rollo , pp. 813-855.

146. Id. at 828-854.
147. Id. at 855 and 1592.
148. Id. at 106.
149. Sea-Land Service, Inc. v. Court of Appeals , 383 Phil. 887, 896 (2000) [Per J.
Ynares-Santiago, First Division] citing Cruz v. Court of Appeals, 354 Phil.
1036 (1998) [Per J. Panganiban, First Division].
150. National Union Fire Insurance Co. of Pittsburg v. Stolt-Nielsen Phil., Inc., 263
Phil. 634, 640 (1990) [Per J. Melencio-Herrera, Second Division].
151. Rep. Act No. 876, sec. 4 in relation to Rep. Act No. 9285, sec. 32.
152. UNCITRAL Model Law on International Commercial Arbitration, chapter I, art. 1
(3) provides:
(3) An arbitration is international if:

(a) the parties to an arbitration agreement have, at the time of the conclusion
of that agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the
parties have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration
agreement;
(ii) any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-matter of
the dispute is most closely connected; or
(c) the parties have expressly agreed that the subject matter of the
arbitration agreement relates to more than one country.
153. UNCITRAL Model Law on International Commercial Arbitration, chapter II, art.
7.
154. 351 Phil. 507 (1998) [Per J. Romero, Third Division].
155. Id. at 524.

156. Id. at 523.
157. Rollo (G.R. No. 196072), p. 130.
158. Id. at 809.

159. 343 Phil. 145 (1994) [Per J. Kapunan, First Division].
160. Id. at 152-154.
161. Rollo (G.R. No. 196072), pp. 2186-2188.
162. Id. at 2188.

163. Id. at 797-807.
164. Id. at 863-866.

165. Id. at 798-802.
166. Id. at 914-915.
167. Id. at 921.

168. Id. at 922.
169. Id. at 923.
170. Id. at 924-925.

171. Id. at 926-927.
172. Id. at 928-929.
173. Id. at 930.

174. Id. at 931-932.
175. Id. at 914-915.
176. Id. at 936.
177. Id. at 937-938.

178. Id. at 939-940.
179. Id. at 941-942.
180. Id. at 933-935.

181. New Life Enterprises v. Court of Appeals , G.R. No. 94071, March 31, 1992,
207 SCRA 669, 676 [Per J. Regalado, Second Division].
182. Rollo (G.R. No. 196072), p. 958.
183. 148-B Phil. 310 (1971) [Per J. Dizon, First Division].
184. Id. at 331-332.

185. Cruz v. Court of Appeals, 354 Phil. 1036, 1054 (1998) [Per J. Panganiban, First
Division].
186. Roblett Industrial Construction Corporation vs. Court of Appeals, 334 Phil. 62
(1997) [Per J. Bellosillo, First Division].
187. A.M. No. 07-11-08-SC (2009).

189. Rollo (G.R. No. 196072), p. 301.
190. Rollo (G.R. No. 208603), p. 365.
191. Id. at 370.

192. Id. at 42-61.
193. Id. at 42.
194. Id. at 45.
195. Id. at 57-58.
196. Id. at 55.

197. Id. at 43.
198. Id. at 44.
199. Id. at 43.

200. Id. at 92-93.
201. Id. at 43-44.
202. Id. at 44.
203. Id.
204. Id. at 44-45.
205. Id. at 45.
206. Id. at 55.

207. Id. at 57.
208. Id. at 53.
209. Id. at 4.
210. 466 Phil. 697 (2004) [Per J. Carpio, First Division] citing Halili v. CIR , 220 Phil.
507 (1985).
211. Id. at 711-712.
212. Bank of the Philippine Islands v. Calanza, 647 Phil. 507-517 (2010) [Per J.
Nachura, Second Division].
213. 672 Phil. 1 (2011) [Per J. Bersamin, First Division].

214. Id. at 16.
215. 710 Phil. 211 (2013) [Per J. Villarama, Jr., First Division].
216. Id. at 232-233.

217. A.M. No. 07-11-08-SC, Rule 4.8.
218. The petition was received by the Court on September 6, 2013.
219. Rollo (G.R. No. 196072), pp. 434-435.
220. Id. at 432-433.

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THIRD DIVISION

[G.R. No. 196072. September 20, 2017.]

STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION

[G.R. No. 208603. September 20, 2017.]

SULPICIO LINES, INC., petitioner, vs. STEAMSHIP MUTUAL

An insured member may be compelled to arbitration pursuant to the

Sulpicio contends that Steamship's Petition for Review should be

absence of evidence but such ﬁndings are contradicted by the evidence on

The Veriﬁcation and Certiﬁcation against Forum Shopping signed by

CD Technologies Asia, Inc. © 2023 cdasiaonline.com

It is the State's policy to promote party autonomy in the mode of

Sulpicio contends that there was no valid arbitration agreement

The Court of Appeals ruled that the arbitration agreement in the

CD Technologies Asia, Inc. © 2023 cdasiaonline.com

CD Technologies Asia, Inc. © 2023 cdasiaonline.com

Finally, Elmer Felipe, Manager of Marine Department of Seaboard-

Sulpicio is estopped from denying knowledge of the Rulebook by its

The Regional Trial Court should suspend proceedings to give way to

In G.R. No. 208603, Sulpicio contends that Steamship's acts were

1. Rollo (G.R. No. 196072), pp. 35-90.

15. Id. at 529-541.

CD Technologies Asia, Inc. © 2023 cdasiaonline.com

b. Obtaining security for such sums; and/or

CD Technologies Asia, Inc. © 2023 cdasiaonline.com

23. Id. at 304-320.

26. Id. at 93-108.

29. Id. at 111-112.

32. Id. at 2212-2233.

36. Id. at 6-7.

39. Id. at 42-61.

42. Rollo (G.R. No. 196072), p. 2183.

46. Id. at 2215-2216.

57. Rollo (G.R. No. 196072), p. 2218.

66. Id. at 797-807.

69. RULES OF COURT, Rule 45, sec. 1.

79. Id. at 2169-2170.

82. Id. at 2215.

92. Id. at 2216.

96. 351 Phil. 507 (1998) [Per J. Romero, Third Division].

99. Id. at 54-55.

102. Id. at 59-60, 62-66.

105. 479 Phil. 114 (2004) [Per J. Ynares-Santiago, First Division].

109. Id. at 80.

116. Id. at 2185.

119. Id. at 2193.

125. Id. at 2230.

130. See National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen

138. Rollo (G.R. No. 196072), p. 809.

142. CIVIL CODE, art. 2011.

145. Rollo , pp. 813-855.

(3) An arbitration is international if:

155. Id. at 524.

158. Id. at 809.

162. Id. at 2188.

164. Id. at 863-866.

167. Id. at 921.

170. Id. at 924-925.

173. Id. at 930.

177. Id. at 937-938.

180. Id. at 933-935.

184. Id. at 331-332.

187. A.M. No. 07-11-08-SC (2009).

191. Id. at 370.